Key Highlights

  • GDP growth was forecast at 1.9% in June 2026, dipping to 1.4% by December and climbing back to 1.8% by late 2028.
  • Business investment was expected to lead early on before fading, with household consumption gradually picking up the slack.
  • The forecasts were finalised before the September rate rise and will be updated.

The RBA's August forecasts sketched an economy that slows through 2026 and then recovers only gradually, with GDP growth dipping to 1.4% before climbing back to 1.8% by the end of 2028, and the composition of that growth matters as much as the headline figures.

Gross domestic product (GDP) growth is the broadest measure of how fast the economy is expanding. In its August 2026 Statement on Monetary Policy (SMP), the Reserve Bank of Australia set out a forecast path that is notable less for any dramatic swing than for how subdued it is across the whole period.

Those forecasts were finalised on 5 August, before the Monetary Policy Board raised the cash rate target by 25 basis points to 4.60% at its 28–29 September meeting. They are best read as the RBA's view at that point, built on a cash rate assumption that has since been overtaken. This guide walks through the path year by year, looks at what was expected to drive it, and notes what has changed since.

The path, period by period

The August SMP forecast year-ended GDP growth as follows:

  • June 2026: 1.9%
  • December 2026: 1.4%
  • June 2027: 1.5%
  • December 2027: 1.6%
  • June 2028: 1.6%
  • December 2028: 1.8%

The shape is a dip and a slow climb. Growth was expected to slow by half a percentage point over the second half of 2026, from 1.9% to 1.4%, then pick up by no more than 0.2 percentage points in any six-month period. By December 2028 it was forecast to reach 1.8%, still slightly below the June 2026 pace.

These forecasts assumed a cash rate of 4.3% in June 2026, 4.4% in December 2026, 4.5% through June and December 2027, and 4.4% in 2028. The actual cash rate of 4.60%, effective 30 September, is above every point on that assumed path.

What was expected to power growth

Breaking the GDP forecast into its parts helps explain its shape.

Household consumption, the largest component of spending, was forecast to grow 1.8% in June 2026, slowing to 1.6% in December 2026 and June 2027, then lifting to 1.8% in December 2027 and 1.9% in both 2028 periods. That profile broadly mirrors the GDP path: a soft patch followed by a modest recovery.

Business investment tells a different story. It was forecast to grow strongly at 6.5% in June 2026, then slow steadily to 4.3% by December 2026, 4.2% by June 2027, 3.2% by December 2027, 1.7% by June 2028 and just 0.2% by December 2028. In other words, the investment boom was expected to fade as the forecast period went on, with household spending gradually taking over more of the work.

Population growth, which adds to the size of the economy, was forecast at 1.4% in 2026, easing to 1.3% by June 2027 and 1.2% thereafter. With population growing at a similar pace to GDP for much of the period, growth per person was expected to be modest.

Labour productivity was forecast to fall by 0.5% over the year to June 2026 and again to December 2026, before recovering to 0.4% by June 2027 and 0.7% by 2028. Governor Michele Bullock summed up the recent picture at her 29 September media conference: "The bottom line is that productivity is doing nothing."

What has happened since August

The minutes of the September meeting, published on 13 October, give an update on the near-term picture. June quarter GDP was a little stronger than expected, led by private business investment, which was up more than 10% over the year. Household consumption slowed in the first half of 2026 to a below-trend pace, which the minutes said was as expected.

The Board's statement described output growth as having slowed but being stronger than expected in the June quarter, with consumer spending easing gradually (both paraphrased). It added that "growth in business investment and debt is strong".

The Board's statement also noted that capacity pressures remain, and Bullock said: "Inflation is too high and has been driven by domestic capacity pressures." Headline CPI was 4.0% over the year to August 2026, according to the monthly CPI, while underlying inflation, measured by the trimmed mean, was 3.6% over the year to the June quarter.

Where jobs fit in

The growth forecasts sit alongside a labour market forecast in which unemployment drifts up gradually: 4.4% in June 2026, 4.5% in December 2026, 4.6% in June 2027, 4.7% in December 2027 and 4.8% through 2028. Employment growth was forecast to stay between 1.1% and 1.4% throughout, while hours-based underutilisation was forecast to edge up from 5.6% to 6.2% by December 2028.

In practice, unemployment rose to 4.6% in August, alongside higher participation, according to the minutes. Bullock noted that "a rise in the unemployment rate does not necessarily mean job losses." She also said "the unemployment rate is still quite low historically, and we still think the labour market is a little bit tight." On the prospect of a recession, her answer was: "That is not our central base case at this moment." The minutes also said "considerable caution is warranted when interpreting the current official labour force data."

The Governor said the full effect of interest rate changes takes 12 to 18 months, so the September increase, which the August forecasts did not include, would be expected to weigh on activity gradually rather than immediately.

The bottom line

The RBA's August forecasts mapped a path of subdued growth: 1.9% in June 2026, a dip to 1.4% by December, and a slow climb back to 1.8% by late 2028. Business investment was expected to lead early on before fading, with household consumption gradually picking up the slack.

Those forecasts predate the September rate rise and assumed a lower cash rate than the current 4.60%. Since then, June quarter GDP has come in a little stronger than expected. The next cash rate decision is scheduled for 2.30 pm on 3 November 2026, and the Governor has said she will not provide forward guidance on the outcome.

These are year-ended GDP growth forecasts reported at six-month intervals, rather than separate annual growth forecasts.